Upload
colleen-clarkson
View
215
Download
1
Tags:
Embed Size (px)
Citation preview
Update on the Affordable Care Act
Mary Bauman
2
The materials and information have been prepared for informational purposes only. This is not legal advice, nor intended to create or constitute a lawyer-client relationship. Before acting on the basis of any information or material, readers who have specific questions or problems should consult their lawyer.
3
HPID identifies a health plan in a HIPAA standard transaction such as an electronic funds transfer or electronic remittance advice
Currently health plans use various identifiers such as NAIC codes, plan sponsor’s EIN plus plan number, etc.
Health Care Reform imposed requirements for the establishment of a unique identifier with a standard format to reduce inefficiencies and increase automation in processing standard transactions
Health Plan Identifier (HPID)
4
Health plans, including fully-insured and self-funded plans, are required to apply for an HPID
For fully-insured plans it appears that the insurer, rather than the plan sponsor, is required to apply for an HPID
Health Plan Identifier (HPID)
5
For self-funded plans it appears that the employer is required to apply for its own HPID and the application must be completed by November 5, 2014 for large plans and November 5, 2015 for small plans A small plan is defined as a health plan with
annual receipts of $5 million or less
Health Plan Identifier (HPID)
6
While a TPA can assist a plan sponsor in applying for an HPID, the HPID application must ultimately be submitted by the plan sponsor
This seems to be a meaningless requirement for the reason that if a self-funded plan uses a TPA, the TPA can be identified in standard transactions rather than the self-funded plan We are waiting for clarification to see if this filing
requirement will be waived or delayed for self-funded plans
Health Plan Identifier (HPID)
7
$2,500 cap on annual employee contributions New optional rule to allow up to $500 carryover
from prior plan year Alternative to 2½ month grace period Can design carryover to be “limited purpose” to
prevent HSA ineligibility Should amend flex plan to prohibit employees
not eligible for employer’s group medical plan from participation to ensure medical FSA is an “excepted benefit”
Medical FSAs
8
Only permitted if: Retiree only HRA; Integrated with group medical plan; or Reimburses limited expenses such as dental
and/or vision
Health Reimbursement Arrangements (“HRAs”)
9
No longer required after December 31, 2014 Since pre-existing condition exclusions no longer
permitted, the certificate is no longer needed to establish offsetting prior coverage
HIPAA Certificates of Creditable Coverage
10
Applies to non-grandfathered health plans beginning in 2014
Must consider all deductibles, copays and coinsurance
Can’t exceed prescribed annual amounts ($6,600/single and $13,200/two-person or family for 2015)
Maximums adjusted annually for changes in the cost of employer-provided coverage
Maximum OOP
11
Maximum aligned with HDHP maximum in 2014 but going forward HDHP maximum will be less because annual adjustment based on CPI (e.g., $6,450 / $12,900 for 2015)
Can split maximum OOP between medical and prescription drug benefits for 2015 and later
Maximum OOP
12
Certain routine patient costs associated with clinical trials (plan years starting in 2014)
First dollar coverage of certain breast cancer drugs (such as tamoxifin and raloxifene) for certain women at increased risk for breast cancer (plan years starting on or after September 24, 2014)
First dollar coverage of contraceptives previously required but now may not be required following the Hobby Lobby opinion for certain employers
Mandated Benefits for Non-Grandfathered Plans
13
The IRS published final regulations regarding the pay or play penalty on February 12, 2014
The new regulations modify proposed regulations issued more than one year earlier and subsequent IRS guidance
Final Regulations – Pay or Play
14
The penalty applies to large employers with at least 50 full-time employees and full-time employee equivalents in the previous calendar year This determination is made separately for each year based
upon the average number of full-time employees during the prior year
The look back for 2015 can be shorter, only considering six consecutive months in the prior calendar year
For this purpose, full-time means at least 30 hours a week The number of full-time employees is based upon the
number of full-time employees plus full-time equivalent employees
Pay or Play Penalty
15
To convert the number of part-time employees to FTEs, determine the total hours worked during each month of the prior year by the employees who average less than 30 hours per week during the month and divide by 120. After making this calculation, add the sum of full-time employees and FTEs for each month, and then divide by 12 to determine the average for the prior year
If companies are under common ownership, they are treated as a single employer for purposes of determining whether there are 50 FTEs. So an employer cannot avoid the rules by dividing its company into multiple companies
Pay or Play Penalty
16
The pay or play penalty was set to take effect as of January 1, 2014
In July 2013, the IRS announced it was pushing back the effective date to January 1, 2015
Pay or Play Penalty
17
There are two different pay or play penalties: $2,000 Penalty If a large employer doesn’t offer health
coverage to at least 95% of its full-time employees and their dependent children and at least one low income full-time employee receives a premium credit, the employer must pay an annual penalty of $2,000 multiplied by all of the employer’s full-time employees, disregarding the first 30 full-time employees Dependent children includes natural born and adopted
children until the end of the month the child attains age 26 (transition relief is available in 2015 for employers taking steps to comply)
Pay or Play Penalty
18
$3,000 Penalty If a large employer does offer health coverage to at least 95% of its full-time employees but it is not “affordable” or is not of “minimum value” and a low income full-time employee receives a premium credit, the employer must pay an annual penalty of $3,000 for each such full-time employee. This penalty is capped at the maximum amount under the $2,000 penalty
Pay or Play Penalty
19
Affordable means the employee’s required contribution for single coverage under the employer’s least expensive medical option doesn’t exceed 9.5% of the employee’s “pay” There are 3 safe harbor methods to determine
affordability: W-2, rate of pay and federal poverty line W-2 Safe Harbor -- The annual premium for single
employee coverage under the employer’s lowest cost health option does not exceed 9.5% of the employee’s wages for that year (as defined for purposes of Box 1 on Form W-2)
Pay or Play Penalty
20
Rate of Pay Safe Harbor -- The employee’s monthly premium is compared to 9.5% of his or her hourly pay rate as in effect as of the beginning of the year, multiplied by 130 (the monthly FTE benchmark)
A similar safe harbor is available for salaried employees based on the employee’s monthly salary at the beginning of the year
Pay or Play Penalty
21
If an hourly employee’s rate of pay is reduced during the year the rate of pay safe harbor is applied separately to each month based on the employee’s hourly pay rate for that month
If a salaried employee’s pay is reduced during the year the rate of pay safe harbor is not available
Pay or Play Penalty
22
Federal Poverty Line Safe Harbor -- Under the federal poverty line safe harbor, coverage provided to an employee is affordable if the employee’s monthly cost for single only coverage under the plan does not exceed 9.5% of the federal poverty line for a single individual as in effect at the beginning of the year or as in effect 6 months before the beginning of the year
In 2014 this would allow a monthly employee contribution of a little over $92
Pay or Play Penalty
23
The 9.5% maximum will be increased in future years for premium growth rates
For 2015 the maximum is 9.56% The cost of dependent coverage is disregarded
under the affordability test
Pay or Play Penalty
24
Minimum value means the plan pays at least 60% of the total allowed cost of benefits provided under the plan
Pay or Play Penalty
25
Mid-size employers The penalty is delayed until the first day of an employer’s 2016
plan year for employers with an average of 50 to 99 full-time employees and full-time employee equivalents in 2014 if the employer satisfies all of the following conditions: The employer does not reduce its workforce during the period of
February 9, 2014 to December 31, 2014 solely to qualify (reductions in workforce for “bona fide” business reasons are permissible);
For the period of February 9, 2014 until the end of the employer’s 2015 plan year, the employer does not eliminate or materially reduce any health coverage it offered as of February 9, 2014; and
The employer certifies that it satisfies these conditions on a form to be provided by the IRS
Transition Relief
26
Large employers Large employers with 100 or more full-time employees
are subject to the pay or play penalty in 2015 However, large employers benefit from two transition
rules for the first year: The $2,000 penalty can be avoided for 2015 if the
employer offers coverage to 70% (vs. 95%) of its full-time employees
If the employer is subject to the $2,000 penalty it may disregard the first 80 full-time employees (vs. 30) when calculating the penalty amount for 2015
Transition Relief
27
Non-calendar year plans The final regulations provide for a delayed effective
date for employers with non-calendar year plans (from January 1, 2015 to the first day of the 2015 plan year) under 3 transition rules
In order to qualify under each transition rule the plan must have been in existence on a non-calendar year basis as of December 27, 2012 and must not have been amended to move the start of the plan year to a later calendar year date
Transition Relief
28
Transition rule #1 – With respect to employees eligible for or enrolled in the employer’s non-calendar year plan under its terms as in effect on February 9, 2014, the penalty will generally not apply until the first day of the employer’s 2015 plan year
Transition Relief
29
Transition rule #2 - However, if the employer doesn’t offer group health coverage to all employees working at least 30 hours per week, transition rule #1 may not apply to those ineligible employees who will be considered full-time. As a result, under transition rule #2, the postponed effective date is available for all employees provided that: At least ¼ of all of the employer’s employees were covered
as of any date from February 10, 2013 to February 9, 2014; or At least 1/3 of all of the employer’s employees were offered
coverage during the most recent open enrollment period that ended before February 9, 2014
Transition Relief
30
Transition rule #3 – If an employer can’t satisfy transition rule #2, transition relief is available for all full-time employees provided that: At least 1/3 of all of the employer’s full-time
employees were covered as of any date from February 10, 2013 to February 9, 2014; or
At least ½ of all of the employer’s full-time employees were offered coverage during the most recent open enrollment period that ended before February 9, 2014
Transition Relief
31
The final regulations provide two methods for employers to determine whether an employee is full-time — a monthly measurement period and a look back measurement period with a stability period Under the monthly measurement period, an employer will be
required to offer coverage to any employee with at least 130 hours for the month
Under the look back measurement period / stability period, an employer may determine which employees are full-time for a future period based on their hours of service during a look back period There may be a measurement period / stability period for certain new
hires and a measurement period / stability period for all ongoing employees
Measurement Period
32
New Hires Full-time employees
Employees who are employed, on average, at least 30 hours per week
Hours counted across all applicable large employer members
If a new hire is reasonably expected to be full-time upon start date, coverage must be offered no later than the first day of the month following the employee’s first three months of employment
No exceptions for employees on short term assignments
Measurement Period
33
Newly-hired variable hours, seasonal and part-time employees Variable hours employees – employer can’t
determine on start date whether employee is reasonably expected an average of 30 or more hours per week Factors to determine include:
Whether the employee is replacing a full-time or variable hours employee;
The hours of employees in the same or comparable positions; and
Whether the job was advertised or communicated as full-time or variable hours
Measurement Period
34
Seasonal employees – work in a position for which the customary annual employment period is six months or less, with the employment period beginning at approximately the same time each year
Part-time employees – employer reasonably expects on start date that employee will be employed, on average, less than 30 hours per week
Newly-hired variable hours, seasonal and part-time new hires can be subjected to an initial measurement period of 3 to 12 months during which the employee must be credited with an average of 30 or more hours per week before health coverage is required to be offered under the pay or play
Measurement Period
35
Measurement Period
Example:Seasonal employee hired 5/14/14
Initial measurement period: 6/1/14 – 5/31/15- also could start on DOH or first day of first payroll
period on or after DOH
Administrative period: 6/1/15 – 6/30/15- can’t extend beyond the last day of the calendar
month beginning on or after the anniversary date
Stability period: 7/1/15 – 6/30/16- must be at least 6 months and as long as the
measurement period
36
Ongoing employees All ongoing employees (including variable hours,
seasonal, part-time and full-time) may be subject to a measurement period in order to qualify for coverage for the immediately following stability period
Measurement Period
37
Measurement Period
Example:Large employer group health plan operates on a calendar year plan year basis
Standard measurement period 11/1/13 – 10/31/14- also could start on the first day of a payroll period
Administrative period: 11/1/14 – 12/31/14- can’t exceed 90 days
Stability period: 1/1/15 – 12/31/15 - must be at least 6 months and as long as the
measurement period- first stability period for employers with 100+ full-time
employees should start on the first day of the 2015 plan year
38
Transition rule For stability periods beginning in 2015,
the look back measurement period can be less than 12 months as long as: It begins by July 1, 2014; Is at least 6 months long; and Ends no earlier than 90 days before the start
of the 2015 stability period
Measurement Period
39
Measurement Period
Example:Rather than first measurement period for ongoing employees in above example running from 11/1/13 to 10/31/14 it could run from 5/1/14 to 10/31/14
40
One size may not fit all The final regulations permit measurement and
stability period differences in terms of length and starting and ending dates for the following groups of employees: Salaried vs. hourly Employees working in different states Union vs. non-union Union vs. union Large employer member by member
Measurement Period
41
Transfers From variable hours, seasonal or part-time to
full-time If during initial measurement period, must
offer coverage by 1st day of 4th month after transfer
Otherwise may wait until 1st stability period as of which employee is eligible based on look back measurement period
Measurement Period
42
From full-time to less than 30 hours / week Continue eligibility until 1st stability period as
of which employee isn’t eligible based on look back measurement period; or
If employee initially offered coverage within 3 months of hire and later switches to less than full-time status, employer may apply a monthly measurement period mid-year to establish the reduction and terminate coverage before the end of the stability period
Measurement Period
43
Hourly – actual hours including: Paid and worked Paid but not working (e.g., vacation) Unpaid leave due to FMLA, USERRA or jury duty
Hours of Service
44
Salaried Same as hourly (actual) or equivalency method
(either 8 hours for each day credited with one hour or 40 hours for each week credited with one hour)
Can use different methods for different reasonable categories of employees
Hours of Service
45
Rehired Employees The final regulations change the rules for determining whether a rehired employee is treated as a new employee. An employee will generally be treated as a new employee only if the employee is absent from work for 13 weeks However, there is an exception for educational organizations. An
employee of an educational organization is required to have a 26-week break in service period to be treated as a new employee
In addition, the rule of parity permitted by the proposed regulations may continue to be used, but is not required. This rule permits a rehired employee to be treated as a new employee if the employee’s period of absence is at least four weeks and exceeded the length of the employee’s prior employment
Hours of Service
46
Another challenge facing large employers subject to the pay or play penalty is how to treat employees leased through a temporary staffing agency
If the employer has the right to direct and control the workers, the workers will be considered to be the common-law employees of the customer-employer as opposed to the temporary staffing agency for purposes of the pay or play
Leased Employees
47
The regulations allow the administrative services agreement between the employer and the temporary staffing agency to be modified to require the temporary staffing agency to offer group health coverage to the employee If coverage is offered and the temporary staffing
agency charges the customer-employer an additional amount with respect to each employee who actually enrolls in that coverage it is considered to be an offer of coverage by the customer-employer for purposes of avoiding the $2,000 penalty
Leased Employees
48
In order for large employers to take advantage of this option it should identify all temporary staffing agencies it utilizes and review the administrative services agreement with each agency
If this approach is taken it does not necessarily relieve the customer-employer from liability under the $3,000 penalty unless the offered coverage constitutes minimum value coverage which is affordable
Leased Employees
49
If the employer hires a leased employee, service through the temporary staffing agency may need to be considered in applying the waiting period under the employer’s group health plan; otherwise, a pay or play penalty may be triggered
Leased Employees
50
In March 2014, final regulations were issued regarding the employer reporting requirements imposed by Health Care Reform
There are two types of reporting which will be required Section 6055 reporting (individual mandate
reporting) Section 6056 reporting (pay or play reporting)
Final Reporting Regulations
51
Section 6055 requires health insurers and employers (regardless of size) to annually report to the IRS and “responsible individuals” whether coverage constitutes minimum essential coverage If the plan is fully-insured, the insurer will assume
this reporting requirement on the employer’s behalf
If the plan is self-funded, the employer is responsible for the 6055 reporting
Final Reporting Regulations
52
Section 6056 reporting only applies to large employers with 50 or more full-time employees and full-time equivalent employees
The purpose of the 6056 reporting is to assist the IRS to enforce the employer pay or play penalty and to assist full-time employees determine whether they are eligible for a premium credit
Final Reporting Regulations
53
If the large employer’s plan is fully-insured the employer will only be responsible for 6056 reporting
If the large employer’s plan is self-funded, the employer will be responsible for both 6055 and 6056 reporting but a consolidated statement may be used (All parts of 1095-C)
Final Reporting Regulations
54
Reporting is required annually during the first quarter of the calendar year after the calendar year to which the reporting relates
The first year for which reporting is required is 2015 so the initial reporting will be due in the first quarter of 2016
Final Reporting Regulations
55
The statement must be provided to employees by no later than January 31 and can be provided with the W-2 or can be provided separately
Then, the employer must batch all of the employee statements and transmit them to the IRS
If the employer has at least 250 employees the transmittal to the IRS must be submitted electronically by no later than March 31
If the employer is smaller the transmittal to the IRS may be filed electronically by March 31, or by mail by no later than February 28 The first reports are required for 2015 and are due in early
2016
Final Reporting Regulations
56
In July 2014 the IRS forms were released in draft form 6055 reporting forms
1095-B (employee statement) 1094-B (transmittal form)
6056 reporting forms 1095-C (employee statement) 1094-C (transmittal form)
Draft instructions were published in August 2014
Final Reporting Regulations
57
Pay or play reporting for a large employer under the general method must include employee specific information on a month-by-month basis
The new regulations provide for simplified reporting with respect to the pay or play reporting for full-time employees who receive a “qualifying offer” of coverage for all 12 months of the year
Final Reporting Regulations
58
A “qualifying offer” is where the employer offers: Employee-only coverage which is affordable
(using 9.5% of the mainland federal poverty line) and of minimum value; and
Coverage to the employee’s spouse and dependents
Final Reporting Regulations
59
For 2015 only, if the employer certifies to the IRS that it has made a qualifying offer, as described above, to at least 95% of its full-time employees and their spouses and dependents there is additional simplified reporting relief with respect to employees covered less than the entire year
Final Reporting Regulations
60
An additional simplified reporting method is available if a large employer certifies to the IRS that it offers coverage which is of minimum value and affordable (using any affordability safe harbor) to at least 98% of its full-time employees
Final Reporting Regulations
61
Large employer should think about how these reporting requirements will intersect the employer’s planned recordkeeping with respect to the pay or play penalty
There is a good faith standard for imposing 2015 reporting penalties for incorrect or incomplete filings
Final Reporting Regulations
62
Unclear when the IRS will issue nondiscrimination regulations with respect to fully-insured non-grandfathered plans
The requirement that large employers with more than 200 full-time employees automatically enroll new full-time employees in group medical coverage does not take effect until after final regulations are issued
What’s Still Missing?
63
Determine whether the employer is a small, mid-size or large employer If small plan, prepare to collect data to evidence If mid-size or large, determine effective date for
pay or play and applicability of transition rules
What Should Be An Employer’s Next Steps?
64
If the pay or play penalty may apply will the employer offer: Coverage to at least 95% (70% for 2015) of full-
time employees? Will the coverage be affordable? Will the coverage meet the minimum value test?
What Should Be An Employer’s Next Steps?
65
Consider whether the employer will adopt a look back measurement period / stability period Establish look back measurement / stability
periods for new hires Establish look back measurement / stability
periods for ongoing employees Consider transition rule for first year Will the employer maintain different rules for
different employee groups?
What Should Be An Employer’s Next Steps?
66
Develop a method for capturing hours Hourly employees Salaried employees
What Should Be An Employer’s Next Steps?
67
Modify health plan and SPD Definition of eligible employee Communicate any measurement
period/stability period Definition of dependent child
Prepare for reporting to IRS and employees
What Should Be An Employer’s Next Steps?
Calder Plaza Building250 Monroe Ave. NWSuite 800Grand Rapids, MI 49503-2250www.millerjohnson.com
Radisson Plaza Building100 West Michigan AvenueSuite 200Kalamazoo, MI 49007-3960www.millerjohnson.com
68
Mary V. Bauman616.831.1704